Federal Budget, March 22, 2016

The Trudeau government’s first budget follows through on several election promises. Its main objective is stimulating growth. However, the significant deficit, which we can expect in coming budgets as well, is a call to prudence, in particular to avoid generating negative impacts on how Canada is being evaluated, especially by credit rating agencies.

Infrastructures

According to the government, boosting the Canadian economy can be achieved through a series of measures designed to assist the middle class and communities. One key measure is a $11.9B injection in the first phase of a five-year infrastructure plan, with $3.4B over three years to modernize and rehabilitate public transit and $5B over five years for green infrastructure projects, water and wastewater systems across Canada.

In this respect, Raymond Chabot Grant Thornton wishes to point out, that for such projects, considering each project’s life cycle cost should be an integral part of its evaluation. To maximize the returns on all strategic projects, it’s essential to ensure that the construction budget takes account of operating, maintenance, financing and other costs to ensure they are a long-lasting success in Canadian communities.

Postsecondary education and research institutions

The government also considers institutional research a key issue. It has therefore increased financing for fundamental research by $95M annually and is investing $2B over three years in a new Post-Secondary Institutions Strategic Investment Fund to modernize on-campus research, commercialization and training facilities.

On the innovation front, the government has also opted to invest $800M over four years for innovation networks and clusters designed to increase collaboration and create value through innovation.

Moreover, the Canada Student Grant will be increased by 50%, from $2,000 to $3,000 per year for students from low-income families, and from $800 to $1,200 per year for students from middle-income families.

Culture

As arts and culture are a driving force in the economy, the government has announced investments of about $1.9M over five years. These targeted investments will be provided to, among others, the Canada Council for the Arts, Telefilm Canada, the National Film Board and unique programs that will allow our artists to shine on the international stage.

Labour-sponsored venture capital corporation tax credit

Lastly, the government has decided to restore the labour-sponsored venture capital corporation tax credit, an initiative Raymond Chabot Grant Thornton applauds as an efficient measure to boost business growth.

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Tax Bulletin – 2016-2017 Quebec Budget: More robust measures to spur business growth would have been desirable (march 2016)

More robust measures to spur business growth would have been desirable

Provincial budget, March 17, 2016

This third budget of Philippe Couillard’s government is balanced, like the previous one. While it is commendable to have a balanced budget which seeks to align living within our means and stimulating economic growth, more weight should have been given to the latter option to avoid further hampering the growth potential of Quebec and its wealth creators.

Raymond Chabot Grant Thornton would have liked to see more new measures to support the development of wealth creators, such as an innovation tax credit or elimination of income tax on SMEs (on the first $500,000 in income).

Education: at the heart of priorities

Raymond Chabot Grant Thornton is pleased to see additional investments in education. Improving student services by some $500M over the next three years is an effective way to support the success of future generations and tomorrow’s leaders who’ll be heading our economic drivers, our businesses.

Good measures for businesses but no reduction in the general tax rate

Starting this year, SMEs will receive payroll tax relief amounting to $94M. In 2020-2021, the relief will amount to $385M, which is $101.5M more than previously announced. We applaud the additional reduction in the Health Services Fund (HSF) contribution, for example, as well as the following measures:

$135M in relief by 2021 for companies that market a Quebec-developed innovation. This represents a reduction to 4% of the tax rate on revenue attributable to a patent, which otherwise would have been 11.8%. This deduction is intended to encourage businesses entitled to tax credits for research and development to market their innovations in Quebec;

$65M in resources is earmarked for the 2016-2021 period to recapitalize or fund three funds specialized in innovative business start-ups, for a global capitalization of $125M;

$96M increase in the capitalization of Fonds Teralys Capital Innovation;

$162M for implementation of the Québec digital strategy over the 2016-2021 period;

$32.5M over three years to support exporting SMEs that want to bring their innovation activities to fruition;

Immediate implementation of the tax relief for transfers of family businesses in the primary and manufacturing sectors rather than January 2017. Raymond Chabot Grant Thornton continues to focus on the issue of tax equity for business transfers in its representations, since the problem remains, particularly for service enterprises.

There is no doubt these measures are of interest to businesses, but reducing the income tax rate is the best approach to helping them be more competitive. For this reason, Raymond Chabot Grant Thornton still considers it necessary to eliminate income tax on the first $500,000 of an SME’s income.

As for the tax system in general, the first recommendation of the Godbout report to initiate a major tax system reform could have been announced. This process must be started quickly, not only in the interest of businesses, but for all Quebec taxpayers.

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For several years now, the Internal Revenue Service (IRS) has been engaged in a vigorous campaign against international tax fraud and failure to declare bank accounts outside the U.S., including Canada. As a U.S. citizen or resident alien (including green card holders) residing in Canada, what are your U.S. tax obligations and what solutions are available to you?

U.S. income tax return filing requirements

U.S. citizens and resident aliens residing outside the United States are required to annually file a U.S. income tax return and declare worldwide income to the IRS, insofar as this income is equal to or greater than the personal exclusion amount and the applicable basic deduction.

The application of specific U.S. deductions combined with the foreign tax credit and the exemptions of the Convention Between Canada and the United States of America will, in the majority of cases, makes it possible to avoid double taxation.